Fitch Ratings has upgraded Turkish Tekstilbank's Long-term foreign and local currency ratings to B from B-. Additionally, the agency has upgraded the Individual rating to D from D/E, and affirmed the Short-term foreign and local currency, Support and National ratings at B, 5 and BBB', respectively. The Outlook on all Long-term ratings is Stable, reported a press release.
The upgrade reflects improved loan quality, sound risk management systems and better liquidity. These are partly offset by a low, albeit improved, level of capital, a weak revenue stream and a competitive operating environment.
During 2003, cash loans increased by 42 percent in US dollar terms and now represent 46 percent of total assets.
According to management, loan growth will subside during 2004 as the bank continues to maintain a highly liquid balance sheet. Non-performing loans (NPLs) improved to 0.3 percent of the portfolio from 1.81 percent in 2002 while reserve coverage now totals 227 percent. When foreclosed property is included, NPLs rose to 4.5 percent of related assets, still down from 8.2 percent in 2002.
Although management does not anticipate any funding problems in July 2004 when deposit insurance coverage is reduced, Tekstilbank has increased liquid assets to 30 percent of total assets through sale of government securities. It will maintain this position that it will maintain most of the year. While this could potentially hurt earning asset yields and profits, the balance sheet will be stronger. The bank's regulatory capital ratio improved moderately to 12.3 percent at end-2003 from 11.5 percent in 2002 and free capital is now positive. However, in light of the competitive operating environment and growth plans, Fitch believes that further capital injections will be necessary.
Tekstilbank reported net earnings of 26.8 trillion Turkish lira in 2003 compared with TL 80.6 trillion in the previous year. Profitability diminished because of lower interest margins, somewhat lower recurring non-interest revenue and tax payments. Similar to other Turkish banks, funding costs were negatively affected in 1H03 by uncertainties surrounding the Iraqi war.
Tekstilbank is primarily a corporate and commercial lender to trade finance companies. It was established in 1986 and is 75 percent-owned by GSD Holdings. GSD is one of the leading groups in its businesses, mainly trade finance and financial services. — (menareport.com)
© 2004 Mena Report (www.menareport.com)
